Potential Delays for Ashirvad Micro Finance’s IPO Amid Industry Challenges
Ashirvad Micro Finance, a significant player in the microfinance sector, appears to be facing challenges that may delay its initial public offering (IPO). Originally slated for launch by the end of September, reports suggest that the unfavorable conditions in the current market may compel the company’s major stakeholder, Manappuram Finance, to postpone the IPO. With over 98% ownership of Ashirvad Micro Finance, Manappuram holds substantial influence over its strategic decisions.
Market Conditions Affecting IPO Plans
Sources indicate that roadshows in preparation for the IPO, which were previously underway, have now been suspended indefinitely. “Recently, the momentum for the IPO has waned, with no further actions being taken toward the company’s listing,” disclosed a source familiar with the ongoing developments.
Industry Struggles and Impact on Valuation
The microfinance industry has experienced increasing obstacles in the current fiscal year. Many lenders, including Fusion Finance Limited, are grappling with challenges in loan recovery. Recently, Fusion Finance disclosed a significant increase in its provisioning estimates, raising them from ₹348 crore to ₹550 crore. This indicates escalating pressure on asset quality across the sector.
Investor Sentiment Shifts
Industry experts have noted a corresponding decline in investor sentiment towards the microfinance sector. “Investor enthusiasm has diminished considerably, resulting in a stark contrast between the promoters’ valuation expectations and the actual market offerings. This divergence is a primary factor in the decision to postpone the IPO,” explained a banker closely associated with the situation.
Communication from Manappuram Finance
Despite attempts to gather insights directly from Manappuram Finance on this matter, there has been no response to emails sent for clarification. However, in a recent phone conversation, VP Nandakumar, the Managing Director and CEO of Manappuram Finance, confirmed the postponement of the IPO plans for Ashirvad Micro Finance but refrained from providing any details regarding a potential new timeline for listing. It is noteworthy that Ashirvad had filed its draft red herring prospectus in October 2023, with the Securities and Exchange Board of India (SEBI) approving the document on April 30, 2024, marking an essential step toward the public offering.
Conclusion
The current climate for microfinance companies presents significant hurdles, with Ashirvad Micro Finance positioned precariously as it navigates these challenges. As developments unfold, stakeholders will be keenly observing how the company adapts and the strategies it employs to align with shifting market conditions.
